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Ten DOs and DON'Ts to Remember for Negotiating Your Next Biotech Collaborative Research and License Agreement

It is well known throughout the biotech industry
that collaborative research and license agreements are key to the strategic development of new products and to the
profitable exploitation of a company’s intellectual property, or IP.However, these types of agreements present
a host of challenges for the negotiators and drafters.Set out below are some “DO's”
and “DON’Ts” to consider for your next negotiation.

1.DO keep in mind that this agreement is
forming an ongoing relationship between the parties.The deal
must work for both sides or the collaboration will fail.DON’T take a “winner take all” negotiating approach.You will need the other party’s
co-operation and good faith efforts for an extended period of time.

2.DO your research.Assess not
only the technical capabilities and financial stability of the other party, but
also the chain of title to the relevant IP.Make your own inquiries.DON’T believe everything you hear,
or assume that your proposed collaborator is as careful at documenting
inventorship, or at protecting trade secrets as you are.Make inquiries.

3.DO take the time to carefully define
what IP of your collaborator you need to use and what of your own background IP
you will allow your collaborator to use.Is there any technology that should be
expressly excluded?DON’T
forget to address issues arising from the joint development of IP during the
collaboration.Who will own joint
IP?What rights or restrictions
will be placed on its use?Who will
file for protection of that IP, and who will pay for that protection?

4.DO ensure that the scope of the license
is as broad as you need or as narrow as you want. If you want to be able to use the IP in
providing services as well as products, or if you need exclusivity for all
fields of use or for any one specific field or territory, then say so.DON’T narrow your use of the
licensor’s trade secrets to only the territories in which patent
protection exists if you will need to use those secrets in any patent-free
jurisdictions.

5.DO establish both a means of regular
communication between the parties and dispute resolution procedures.A
collaboration is ever changing.DON’T ignore the fact that you cannot anticipate all possible
issues that may arise during the course of the relationship.Creating a joint steering committee that
meets regularly, reviews the progress of the project and has decision making
and dispute resolution powers will help keep the project on track.

6.DO consider whether multiple
technologies (and therefore multiple royalties) should be factored into the
equation.However, as licensor, do not agree to a standard royalty dilution clause
when your IP is of a “platform” nature.DON’T pay royalties on IP that
your competitors can use for free.Once a patent expires or is held invalid, or a trade secret is no longer
a secret, your agreement should provide that your obligation to pay royalties
for that technology end.

7.DO determine whether you will need
sublicensing rights.If so, acquire those rights now. Also,
assess what comfort your sublicensees will need in order for them to make a
long-term financial commitment to your technology.Should sublicenses survive the
termination of your head license?As a licensor, determine what protections you will need to put into
place before you agree to give your licensee broad sublicensing rights.DON’T settle for a right to
sublicense upon the consent of the licensor unless you are the licensor.

8.DO remember that a multi-jurisdictional
agreement raises multi-jurisdictional legal issues. For example, the laws
respecting grant-back rights to IP, the rights of parties to exploit jointly
owned IP, and the rights of parties on bankruptcy can vary greatly from country
to country.DON’T assume that
the treatment of an issue in your home jurisdiction will be the treatment
applied elsewhere.Get local legal
advice for important issues, such as the effect that the bankruptcy of the
other party may have on your license.

9.DO consider incorporating a technology
transfer process into your arrangement.Where a tech transfer is occurring,
arrange for key personnel to be on-site or readily accessible for the transfer
period, and identify how the costs and expenses of the transfer process will be
handled.Licensors should be wary
of accepting open-ended obligations to support the transfer process.DON’T forget about obtaining
access to biological materials which may not be proprietary but the use of
which will save you time and money.

10.DO plan for the end of the relationship.
No collaboration
or license will last forever, so determine when and under what circumstances
your agreement should end.If your
arrangement is exclusive, the length of the term and the termination triggers
will be key.DON’T forget about the rights you
may need after termination (e.g. to continue to use background IP, to use jointly
developed IP, to continue with sublicense arrangements).

Collaborative relationships are complex and
dynamic.Each one is unique.However, the end goal of your drafting
should be to accommodate and stimulate the collaboration and the profitable
exploitation of the results of that collaboration.

Beth Macdonald is a partner in the Vancouver office of
McCarthy Tétrault LLP and chair of the firm’s National Biotechnology
Law Group.For more information
on our Biotechnology Law Group, click
here.